Flashback a decade or more, when most households still subscribed to the Sunday paper. For many shoppers, the day began by cutting the included coupons before heading to the grocery store.
Today, though, couponing is a dying practice. Over the past several years, the number of shoppers who said they used coupons clipped from Sunday newspaper inserts have plummeted from nearly half to just 20%, according to CPG research firm TABS Analytics. There’s a confluence of events impacting the usefulness of coupons. But one of the biggest factors is that a one-size-fits-all discount, focused on a single product, is not enough to motivate today’s consumers.
Brands are being forced to think differently. Blanket discounts and broad offers are inefficient transactional tools. And they are incapable of driving the long-term results brands desire: to increase ongoing customer engagement, which translates into more sales and revenue, and greater customer lifetime value (LTV).
The key to achieving these results is relevancy. You want to build a relationship with your customers by delivering the right message and offer, at the right time and right place. To do this effectively, you need to understand the unique needs, desires and motivations of each customer, on an individual basis, to create offers that will result in the preferred behavior.
Why Segmentation Doesn’t Work
Oftentimes marketers apply segmentation to a large group of people — same demographics but very different characteristics. Segmentation fails to understand what really motivates customers and how they interact with your brand. Here’s what it looks like in practice.
Consider two customers – Jess and Sarah – who both share the same demographics: single, female, millennial making less than $100,000 in annual income. But dig a little deeper about each woman, and you’ll begin to realize there are stark differences. Jess is a trendsetter who wants to engage with a product in a way that puts fashion, not price, first. Sarah is a value shopper who returns to the brand when the price is right.
Because of their differences in personality and motivation, a general “buy $100, save $10” offer as part of the brand’s loyalty program is not likely to motivate either woman. For Jess, the company needs to appeal to her desire for digital engagement, perhaps providing bonus points or rewards for downloading a mobile app, posting photos or sharing positive reviews of hot, new products. Sarah, on the other hand, looks for bargains and ways to get more for less money. Giving greater discounts for more purchases in a given period of time may be what spurs Sarah to buy more products.
Going Beyond Segmentation
So, if you’re the retailer trying to appeal to Jess and Sarah, what’s the best approach to ensure that both find reasons to continue shopping at your store? The key is true 1:1 personalization – which can only be achieved with the right technology that leverages your customer data.
Many brands claim they do 1:1 personalization, but when you look closer, they’re only breaking down customer groups into microsegments (10-30 segments) that have more in common than high level demographics. These microsegments fall short of personalization (and relevancy, don’t hit the mark). They do not drill down far enough to get to the individuals’ motivations. It’s difficult to get beyond microsegmentation, though. Most companies don’t have the right tools, so it would be too time consuming, resource-intensive and complex to analyze the necessary data, then formulate a unique offer for each one of their millions of customers.
True 1:1 personalization can only be achieved through the power of artificial intelligence (AI) and machine learning (ML). These technologies, which are at the heart of the Formation solution, enable you to take disparate customer data and create actionable insights for individualized offers. Our AI and ML enables you to continuously fine-tune offers by analyzing customers’ interactions and learning from them.
Consider creating promotional offers for 10 to even 100 segments. For many high-performing teams, it could be possible, but it would take a considerable amount of manual work and an increase of headcount. Now imagine creating offers for a 1,000 or more segments. For most companies, this would be impossible.
This is where Formation’s solution comes in. We help the world’s largest companies utilize AI and ML to create uniquely tailored offers intelligently. Brands we work with can create millions of offer variations to form true 1:1 personalization that understands a customer’s motivations and increases their engagement.
Here’s a look at how you can increase customer engagement by creating true 1:1 personalized offers and journeys with the Formation solution.
Formation Helps Brands Leverage Customer Data
You probably have a lot of data on your customers, through loyalty programs and other platforms. Formation is able to coalesce these disparate sources and bridge the gap between your various data silos.
By providing actionable insights in real time, Formation helps you understand your customers' motivations and provides a vital link between your data platforms and delivery systems, such as email, mobile apps and other brand channels.
The Formation solution then leverages machine learning to create 1:1 personalized offers, which help guide your customers’ journeys. We enable you to send out millions of offer combinations that are uniquely tailored to each customer. But the work doesn't stop there. Our ML algorithms continue to test and fine-tune offers based on your customers' buying habits, interests and motivations, making intelligent predictions about additional offers you could send them to increase buying.
Additionally, Formation helps brands scale and increase the number of offer variations (that are unique to each individual customer) without adding more team members or the work required to do it. With AI and ML, you’ll improve marketing efficiency and your return on investment (ROI).
Our approach is designed to enhance customer engagement. Offers can be developed to meet a number of goals, such as:
And with Formation, you can develop these 1:1 personalized offerings faster than traditional methods. For example, if you were leveraging microsegmentation to create offers for 10 to 30 segment groups, you’d require a large team and at least three to six months to develop offers with only about 1,000 variants. Formation helps scale this process, enabling offers with millions of variations to be created in a matter of weeks, essentially allowing you to target a segment of one.
True 1:1 personalization doesn’t have to be a pipe dream. Formation makes it a reality, allowing you to optimize customer journeys by creating a closer connection with your customers through personalized offers.
By leveraging Formation’s technology to gain insights and understandings into individual motivations, you can be more efficient and effective with your marketing efforts, send the right messages to your customers at the right time and right place. Using 1:1 personalized marketing allows you to become more customer-centric, which ultimately translates to growth of net incremental revenue and enhancements in customer LTV.
With Formation as a foundation for personalization marketing, companies are seeing impressive business value: up to 3x increase net incremental revenue, 2x increase in marketing efficiency and 10x faster marketing execution.
Interested in seeing how this can work for your brand? Schedule a demo with Formation today.